A presentation by

Ahmad Tariq Bhatti

FCMA, FPA, MA (Economics), BSc
Dubai, United Arab Emirates
To Mr. Anthony F. Holbrooke, CPA

Internal Audit Framework 2

 WHAT?
Internal auditing is an
independent, objective assurance and
consulting activity designed to add value
and improve an organization's operations.
It helps an organization accomplish its
objectives by bringing a
systematic, disciplined approach to
evaluate and improve the effectiveness of
risk management, control, and governance
processes.
[The Institute of Internal Auditors, USA]
Internal Audit Framework 3
 WHY?
The main objectives of internal audit are to provide
assurance on the adequacy of the whole control
environment, advise at an early stage in the implementation
of any system developments or amendments to
processes, development and implementation of
organizational policies.
Internal Audit provide assurance that the organization’s
values are met and that laws and regulations are complied
with. It ensures that financial statements and other published
information are accurate and reliable and that
human, financial and other resources are managed efficiently
and effectively. Internal audit also forms part of the wider
anti-fraud and anti-corruption framework of a company.
Internal Audit Framework 4
 TYPES
Following are the types of audits carried out by internal auditors:
 Compliance audit: To ensure compliance with
rules, regulations and laws applicable to a company.
 Operational audit: To ensure efficient and effective conduct
of operations of a company.
 Information system audit: To ensure proper functioning of
the information system throughout the life of a business.
 Performance audit: To ensure the efficient use of resources
to obtain the objectives of a company.
 Environmental audits: To ensure compliance with the
environmental laws and regulations
 Special assignments relate to investigations on fraud and
corruption, or any other special service with the approval of
the board.
Internal Audit Framework 5
 INDEPENDENCE & OBJECTIVITY
The internal audit activity must be free from interference by any influence in the
organization, including matters of audit selection, scope, procedures, frequency,
timing, or report content to permit maintenance of a necessary independent and
objective mental attitude.
Internal auditors should have no direct operational responsibility or authority over
any of the activities audited. Accordingly, they will not implement internal
controls, develop procedures, install systems, prepare records, or engage in any
other activity that may impair internal auditor’s judgment.
Internal auditors must exhibit the highest level of professional objectivity in
gathering, evaluating, and communicating information about the activity or
process being examined. Internal auditors must make a balanced assessment of all
the relevant circumstances and not be unduly influenced by their own interests or
by others in forming judgments.
Chief Audit Executive (CAE) should confirm to the board, at least annually, the
organizational independence of the internal audit activity. An approved internal
audit charter and a competent audit committee may protect the independence of
the internal audit activity.

Internal Audit Framework 6

ASSURANCE & CONSULTING ACTIVITY
Assurance services are the services that improve the quality of
information about the processes, effectiveness of
controls, reliability of information, or compliance with statutory
framework, efficiency and effectiveness of the operations being
carried out.
Consulting services means that apart from highlighting
problems, internal auditors provide quality solutions to the
problems. It is very much a value adding service.
Remember,
 Internal auditors do not implement their recommendations.
Implementation of solution alternatives is the sole responsibility
of the management.
 The internal audit department should setup a mechanism to
monitor objectivity in every assurance and consulting activity.
Prompt actions must be taken to prevent potential loss to
objectivity.
Internal Audit Framework 7
ROLE IN GOVERNANCE PROCESS
Risk management is the responsibility of management. Internal audit
activity assesses risks embedded in all functions across all the
departments of a company and suggests controls to eliminate them. The
purpose is to eliminate all risks in the system. The successful elimination
of all risks ensures efficient and effective accomplishment of business
plans and guarantees business success. Management has a key role to
play in the implementation of controls as recommended by the internal
auditors. Apart from the recommendations of the internal
auditors, management is primarily responsible for the establishment of
control environment. The assessment of the risks by the internal auditors
provide refinement to the process of control systems. The reinforcement
of controls upon the recommendation of the internal auditors help a
company in improving the effectiveness of risk management, control
system and governance process.

Internal Audit Framework 8

 AUDIT COMMITTEE
An audit committee is an arm of the board of
directors, generally composed of 3 to 5 members of the
board, with a chairperson selected from among the
committee members. The members should be board members
and outsiders i.e. the individuals who are neither employees
nor part of management.
The audit committee has an oversight responsibility for
internal and external audit functions. Audit committee acts
as an independent check on management and helps the
external financial statements’ users in assuring that financial
statements accurately portray the business activities of a
company. And that effective internal control system is in
place. All laws and regulations are complied by the company.

Internal Audit Framework 9

INTERNATIONAL PROFESSIONAL
PRACTICES FRAMEWORK (IPPF)

Strongly Recommended
Mandatory Guidance
Guidance

Definition of I/A Position Papers (PPs)

Code of Ethics Practice Advisories (PAs)

The standards Practice Guides (PGs)

Internal Audit Framework 10

 THE STANDARDS
Internal auditors carry out their work in accordance with the given
set of rules, regulations and standards. These standards are provided
by the Institute of Internal Auditors, USA. The standards are
known as, International Standards for the Professional Practice
of Internal Auditing (the standards). These standards provide
guidance on assurance and consulting activities. The application of
these standards during work is mandatory upon internal auditors.
Following are the types of the standards:
 Attribute Standards pertain to the company and team/staff
performing the audit work.
 Performance Standards are about the nature of internal
auditing and provide quality criteria for the performance of the
work.
 Implementation Standards provide guidance for each attribute
or performance standard to be applicable to assurance (A) or
consulting (C) activity.
Internal Audit Framework 11
 AUTHORITY
The staff of Internal Audit Office reports to CAE who reports to Audit
Committee or the board directly. CAE have full and free access to the
audit committee or the board. CAE for administrative purposes may
report to the CEO but for functional purposes shall always report to audit
committee or the board directly.
Internal audit is fully authorized to:
 Have complete and unrestricted access to records, personnel, and physical
properties relevant to the performance of engagements.
 Delegate duties, allocate resources, select team, determine scope of works, and
select required techniques to accomplish objectives.
 Obtain necessary assistance of personnel in audited units and other specialized
services within or outside the organization.

Internal audit staff is not authorized to:

 Perform any operational duties for the company.
 Initiate or approve accounting transactions external to the Internal Audit Office.
 Direct the activities of any department’s employees not employed by the Internal
Audit Office, except those who have been assigned to assist the audit team.

Internal Audit Framework 12

 RESPONSIBILITY
CAE, in the discharge of his duties, has the responsibility to:
 Provide annual assessment on the effectiveness of the company’s controls in
managing its risks and activities. Identify and assess potential risks to the
operations.
 Review the adequacy of controls established to ensure compliance with
policies, plans, procedures, and business objectives.
 Provide periodic information on the status of the annual audit plan and the
sufficiency of the Internal Audit Office’s resources.
 Present a periodic (say quarterly) report to the audit committee.
 Assess the reliability and security of financial and management information and
the systems and operations that produce the information.
 Assess the means of safeguarding assets.
 Review established procedures and systems and propose improvements.
 Appraise the use of resources with regard to economy, efficiency and
effectiveness.
 Follow up recommendations to make sure that effective remedial action is taken.

Internal Audit Framework 13

 RESPONSIBILITY
(continued)
 Carry out appraisals, investigations, or reviews requested by the management.
 CAE and staff of the Internal Audit Office, in the discharge of their duties, have
the responsibility to:
 Develop an annual audit plan based on comprehensive risk assessment, including
risks identified by the management.
 Submit the annual audit plan to the audit committee or the board for approval.
 Implement the annual audit plan as approved, including special requests by
management.
 Issue periodic reports to the audit committee summarizing the results of the audits.
 Coordinate with and provide oversight of other controls and monitoring functions
related to risk management, compliance, security, ethics, and environmental issues.
 Assist in the investigation of suspected fraudulent activities within the organization
upon request made from management.
 Consider the scope of work of the external auditors and regulators to provide wider
audit coverage.
 Consider the scope of work required of external service providers or consultants.

Internal Audit Framework 14

CONTROL ENVIRONMENT
The attitude and actions of the board and management
regarding the importance of control within the organization.
The control environment provides the discipline and
structure for the achievement of the primary objectives of
the system of internal control.
The control environment includes the following elements:
 Integrity and ethical values.
 Management’s philosophy and operating style.
 Organizational structure.
 Assignment of authority and responsibility.
 Human resource policies and practices.
 Competence of personnel.
N.B.: External auditors take internal audit as component of the
control environment.
Internal Audit Framework 15
 FRAUD DETERRENCE
Managing the risk of fraud and corruption is the
responsibility of management. Audit procedures
alone, even when performed with due professional
care, cannot guarantee that fraud or corruption will
be detected. Internal audit does not have
responsibility for the prevention or detection of
fraud and corruption. Internal auditors will,
however, be alert in all their work to risks and
exposures that could allow fraud or corruption.
Internal audit may be requested by management
to assist with fraud examination work.

Internal Audit Framework 16

 SCOPE
The scope of internal auditing encompasses, but is not limited to, the
examination and evaluation of the adequacy and effectiveness of the
organization's governance, risk management, and internal process as well
as the quality of performance in carrying out assigned responsibilities to
achieve the organization’s stated goals and objectives.
This includes:
 Evaluating the reliability and integrity of information and the
means used to identify, measure, classify, and report such
information.
 Evaluating the systems established to ensure compliance with
those policies, plans, procedures, laws, and regulations which
could have a significant impact on the organization.
 Evaluating the means of safeguarding assets and, as
appropriate, verifying the existence of such assets.
 Evaluating the effectiveness and efficiency with which resources
are employed.
Internal Audit Framework 17
 INTERNAL AUDIT CHARTER
According to the standards, the purpose, authority and responsibility
must be mentioned in an internal audit charter.
A typical internal audit charter outlines information about the following:
1. Mission
2. Scope
3. Responsibilities of management
4. Responsibilities of internal audit
5. Relationship with external auditors
6. Status of internal audit
7. Authority of internal audit work
8. Reporting
9. Conclusion
N.B.: Internal audit charter must be reviewed on periodic basis and should
be approved by the board.

Internal Audit Framework 18

 ANNUAL AUDIT PLAN
In cooperation with the senior management, perform the
following:
 Conduct a preliminary risk assessment by utilizing a group
interview.
 Gather top management input on the preliminary risk
assessment.
 Prepare a Draft Annual Audit Plan based upon the results of
the risk assessment process.
 Obtain the formal approval of the Audit Committee or the
board.
This plan will be subject to reviews during the course of audit work to ensure that the
focus continues to be on the higher risk areas. In addition, the need to conduct special
assignments requested from the Audit Committee and senior management may also
require the deferral of planned audit work. Additional work may require additional
staff and the help of specialist or consultant coming from outside the company.
N.B.: The approval of audit committee is suffice, however, where no audit committee is
existing approval of the board should be taken.
Internal Audit Framework 19
 COMMUNICATION OF I/A PLAN
 Distribute annual audit plan to senior management.
 Keep senior management informed of any changes to
annual audit plan.
 Ensure that management is informed about the internal
audit work at least a month prior to starting the work.
 Note that special requested assignments require different
procedures involving little or no notification to involved
management.
 If there is any special assignment going parallel with the
normal audit, tell the time frame for the completion of the
additional assignment.
 If there is need for additional persons in the team because
of additional work, raise the requisition at most
appropriate time.
Internal Audit Framework 20
INTERNAL AUDIT PROCESS
FOR ALL BUSINESSES
 PLANNING
 Evaluating operations or programs to ascertain whether results are
consistent with established objectives and goals and whether the
operations or programs are being carried out as planned.
 Monitoring and evaluating governance processes.
 Monitoring and evaluating the effectiveness of the organization's risk
management processes.
 Evaluating the quality of performance of external auditors and the degree
of coordination required with internal audit.
 Performing consulting and advisory services related to governance, risk
management and control as appropriate for the company.
 Reporting periodically on the internal audit activity’s purpose, authority,
responsibility, and performance relative to its plan.
 Reporting significant risk exposures and control issues, including fraud
risks, governance issues, and other matters needed or requested by the
Board.
 Evaluating specific operations at the request of the board or
management, as appropriate.
Internal Audit Framework 22
PERFORM AUDIT FIELDWORK
Carry out fieldwork as indicated in the annual audit
plan.
Obtain cooperation from the management and the
staff as necessary to identify, obtain documentation
and conduct interviews, etc.
Conduct fieldwork with minimal disruption to
operations of the company being audited.
Build friendly environment with the management.
Avoid any friction in relationship with the
management or the staff engaged with you by the
company. As it may create problem for the work
being carried out. Be tactful!
Internal Audit Framework 23
 RISK COMPOSITION

Internal audit has a

responsibility to cover
financial, operational, i
nformation
system, legal/regulatory
and all other risks that
may have significant
impact on the business
of an entity.

Internal Audit Framework 24

 RISK MANAGEMENT PROCESS
 Risk identification
 Expert interviews with management personnel
 Risk assessment meetings
 Review of previous risk assessment working papers by I/A deptt.
 Filling detailed questionnaires for adequate existence of internal controls.
Ensuring the appropriateness of these questionnaires in alignment with the
operations of the company.
 Carefully reviewing the results of internal audit questionnaires and marking
red flags where serious control violations are found.
 Reviewing management working papers for risk assessments made by them.
 Reviewing system descriptions available from management and from available
manuals for operations, financial controls and accounting and noting down
weak controls or absence of controls.
 Risk qualification & prioritization
 Risk monitoring
 Risk mitigation & avoidance
Internal Audit Framework 25
RISK MANAGEMENT PROCESS
 Risk identification
 Risk qualification & prioritization
Once risks are identified, it is important to determine the probability
and impact of each risk on efficient and effective conduct of the
business activities. Risks which are more likely to occur and have a
significant impact on the business will be the highest priority risks
while those which are more unlikely or have a low impact will be a
much lower priority. This is usually done with a probability – impact
matrix. Once the risks are assigned a probability/impact and placed in
the appropriate position on the chart, the auditor moves the process to
the next step: risk monitoring..
 Risk monitoring
 Risk mitigation & avoidance

Internal Audit Framework 26

RISK MANAGEMENT PROCESS
 Risk identification
 Risk qualification & prioritization
 Risk monitoring
Normally each control is assigned a number say 1 to 5, 1 is showing
the lowest strength and 5 showing the highest strength of a control.
Internal audit assigns these numbers to each control. And after all
controls are marked with these numbers then an average is taken by
adding all numbers and diving them by the number of controls. The
number obtained defines overall strength of the set of controls being
examined. Based on the overall strength of controls extent of work is
calculated.
 Risk mitigation & avoidance

Internal Audit Framework 27

RISK MANAGEMENT PROCESS
 Risk identification
 Risk qualification & prioritization
 Risk monitoring
 Risk mitigation & avoidance
Once risks have been qualified, the team must determine how to
eliminate those risks which have the greatest probability and impact
on the business. This section explains the considerations which must
be made and the options available to the management in mitigating
and avoiding these risks. Internal auditor shall exercise his judgment
as to how he can eliminate the risks identified during the process.
After examination is completed, he shall recommend management in
writing to follow certain procedures that shall ensure elimination of
risks.

Internal Audit Framework 28

 REPORT RESULTS
 In general, share important and
sensitive findings with responsible
managers immediately upon
verification by the auditor; short memo
reports may be used in this process.

 Prepare a first draft of the final report

and discuss it with responsible
managers immediately following the
fieldwork.
Internal Audit Framework 29
 FINALIZE AUDIT WORK
Schedule an exit meeting after management has received the
first draft of the audit report; this meeting will provide the
opportunity for management to discuss
findings, conclusions, and recommendations with the
auditor.
During or immediately after exit meeting, ask management
to provide their responses to the auditor's findings and
recommendations, either in writing or in sufficient detail for
the auditors to capture them and reduce them to writing in
the final draft report.

Internal Audit Framework 30

REVIEW FINAL REPORT
Send final draft of the audit report to
management and discuss suggested changes by
them. After processing changes, issue the final
report to the distribution as indicated on the
cover letter to the report.
Note:
All reports shall contain an executive summary
which provides in a short form the
observations, management responses, and
auditor's conclusion.

Internal Audit Framework 31

 FINAL REPORT
 Issue final report to the management.
 Prepare checklist of issues to be
discussed with the management in next
period audit.
 Write down the comments of the
management on report.

Internal Audit Framework 32

 FOLLOW UP
At the completion of each audit, the auditor will send an
evaluation survey form to the clients of the audit. This form
should be completed and returned to the Office of Internal
Audit, in order to ensure continuous improvement of these
procedures and the internal audit function.
Approximately six months following completion of each
audit, the auditor will conduct a follow-up review to verify
the completion of agreed-upon management actions and
ascertain the status of open recommendations. A follow-up
report will be generated annually for distribution to senior
management and members of the Audit Committee.

Internal Audit Framework 33

 AVOID PITFALLS
Richard Chambers, CIA, has shared his experience about
failure of internal audit assignments. He has mentioned 6 main
reasons for the failure of internal audit. We agree with him on
the reasons of internal audit failure and wish them to be avoided
while performing internal audit work. They are as given below:
1. Not setting aside enough time to properly plan the audit work.
Proper planning is the glorious road to successful audit work.
2. Trying to audit too much, be relevant to risk. Keep one eye on
relevance of work being done with overall objectives of the audit.
3. Not involving the client or the auditee personnel.
4. Failing to augment the audit team with “functional expertise”.
5. Forgetting that the audit should ultimately add value.
6. Forgetting to follow the risks. New risks may emerge during the
progress of audit work. Change work plan according to them.

Internal Audit Framework 34

 Internal vs. External Auditing
# Internal Audit External Audit
Internal auditors are appointed and removed External auditors are appointed and removed by the
1 by the management of the company any time. shareholders directly during AGM.

The scope of I/A is much broader and covers The scope of E/A is specified in the terms of
2 all risks to a business entity. reference signed with the company.

The objective of I/A is to help management in The objective of E/A is to report on the truth and
risk management and add value by creating fairness of the financial statements by examining
3 efficiency in systems and finally obtain the underlying records and based on the evaluation of
objectives of a business entity. evidence gathered during the work.

External auditors report to the shareholders’

representatives, the members on the board of
4 Internal auditors report to the audit committee.
directors. They directly interact with members while
sitting in AGM or EGM.

The report of external auditors is shared with the

The report of internal auditors is shared with shareholders and after being published is shared with
5 management via audit committee. public, in the case of listed company having share
capital from public.
Internal Audit Framework 35
 CODE OF ETHICS -
FOR INTERNAL AUDITORS
AS GIVEN BY THE IIA, USA
 PRINCIPLES
The internal auditors are expected to apply and uphold the following principles:
 Integrity
The integrity of internal auditors establishes trust and thus provides the basis for
reliance on their judgment.
 Objectivity
Internal auditors exhibit the highest level of professional objectivity in gathering,
evaluating, and communicating information about the activity or process being
examined. Internal auditors make a balanced assessment of all the relevant
circumstances and are not unduly influenced by their own interests or by others
in forming judgments.
 Confidentiality
Internal auditors respect the value and ownership of information they receive and
do not disclose information without appropriate authority unless there is a legal
or professional obligation to do so.
 Competency
Internal auditors apply the knowledge, skills, and experience needed in the
performance of internal audit services..

Internal Audit Framework 37

 RULES OF CONDUCT
1. Integrity
Internal Auditors:
 Shall perform their work with honesty, diligence, and responsibility.
 Shall observe the law and make disclosures expected by the law and the
profession.
 Shall not knowingly be a party to any illegal activity, or engage in acts that are
discreditable to the profession of internal auditing or to the organization.
 Shall respect and contribute to the legitimate and ethical objectives of the
organization.

2. Objectivity
Internal Auditors:
 Shall not participate in any activity or relationship that may impair or be
presumed to impair their unbiased assessment. This participation includes those
activities or relationships that may be in conflict with the interests of the
organization.
 Shall not accept anything that may impair or be presumed to impair their
professional judgment.
 Shall disclose all material facts known to them that, if not disclosed, may distort
the reporting of activities under review.

Internal Audit Framework 38

 RULES OF CONDUCT
(continued)
3. Confidentiality
Internal Auditors:
 Shall be prudent in the use and protection of information acquired in the
course of their duties.
 Shall not use information for any personal gain or in any manner that would
be contrary to the law or detrimental to the legitimate and ethical objectives
of the organization.

4. Competency
Internal Auditors:
 Shall engage only in those services for which they have the necessary
knowledge, skills, and experience.
 Shall perform internal audit services in accordance with the International
Standards for the Professional Practice of Internal Auditing.
 Shall continually improve their proficiency and the effectiveness and quality
of their services.

Internal Audit Framework 39

 INTERNAL AUDIT -
OFFICIAL TERMINOLOGY
AS PROVIDED BY THE IIA, USA
1. Add Value
The internal audit activity adds value to the organization (and its stakeholders) when it provides objective
and relevant assurance, and contributes to the effectiveness and efficiency of governance, risk
management, and control processes.

2. Adequate Control
Present if management has planned and organized (designed) in a manner that provides reasonable
assurance that the organization’s risks have been managed effectively and that the organization’s goals
and objectives will be achieved efficiently and economically.

3. Assurance Services
An objective examination of evidence for the purpose of providing an independent assessment on
governance, risk management, and control processes for the organization. Examples may include
financial, performance, compliance, system security, and due diligence engagements.

4. Board
A board is an organization’s governing body, such as a board of directors, supervisory board, head of an
agency or legislative body, board of governors or trustees of a nonprofit organization, or any other
designated body of the organization, including the audit committee to whom the chief audit executive
may functionally report.

5. Charter
The internal audit charter is a formal document that defines the internal audit activity’s
purpose, authority, and responsibility. The internal audit charter establishes the internal audit activity’s
position within the organization; authorizes access to records, personnel, and physical properties relevant
to the performance of engagements; and defines the scope of internal audit activities.

Internal Audit Framework 41

6. Chief Audit Executive
Chief audit executive describes a person in a senior position responsible for effectively managing the
internal audit activity in accordance with the internal audit charter and the Definition of Internal
Auditing, the Code of Ethics, and the Standards. The chief audit executive or others reporting to the chief
audit executive will have appropriate professional certifications and qualifications. The specific job title
of the chief audit executive may vary across organizations.

7. Code of Ethics
The Code of Ethics of The Institute of Internal Auditors (IIA) are Principles relevant to the profession
and practice of internal auditing, and Rules of Conduct that describe behavior expected of internal
auditors. The Code of Ethics applies to both parties and entities that provide internal audit services. The
purpose of the Code of Ethics is to promote an ethical culture in the global profession of internal
auditing.

8. Compliance
Adherence to policies, plans, procedures, laws, regulations, contracts, or other requirements.

9. Conflict of Interest
Any relationship that is, or appears to be, not in the best interest of the organization. A conflict of interest
would prejudice an individual’s ability to perform his or her duties and responsibilities objectively.

10. Consulting Services

Advisory and related client service activities, the nature and scope of which are agreed with the client,
are intended to add value and improve an organization’s governance, risk management, and control
processes without the internal auditor assuming management responsibility. Examples include counsel,
advice, facilitation, and training.

11. Control Processes

The policies, procedures, and activities that are part of a control framework, designed to ensure that risks
are contained within the risk tolerances established by the risk management process.
Internal Audit Framework 42
12. Control
Any action taken by management, the board, and other parties to manage risk and increase the likelihood
that established objectives and goals will be achieved. Management plans, organizes, and directs the
performance of sufficient actions to provide reasonable assurance that objectives and goals will be
achieved.

13. Control Environment

The attitude and actions of the board and management regarding the importance of control within the
organization. The control environment provides the discipline and structure for the achievement of the
primary objectives of the system of internal control. The control environment includes the following
elements:

 Integrity and ethical values.

 Management’s philosophy and operating style.
 Organizational structure.
 Assignment of authority and responsibility.
 Human resource policies and practices.
 Competence of personnel.

14. Control Processes

The policies, procedures, and activities that are part of a control framework, designed to ensure that risks
are contained within the risk tolerances established by the risk management process.

15. Engagement
A specific internal audit assignment, task, or review activity, such as an internal audit, control self-
assessment review, fraud examination, or consultancy. An engagement may include multiple tasks or
activities designed to accomplish a specific set of related objectives.

16. External Service Provider

A person or firm outside of the organization that has special knowledge, skill, and experience in a particular
discipline. Internal Audit Framework 43
17. Engagement Objectives
Broad statements developed by internal auditors that define intended engagement accomplishments.

18. Engagement Work Program

A document that lists the procedures to be followed during an engagement, designed to achieve the
engagement plan.

19. Fraud
Any illegal act characterized by deceit, concealment, or violation of trust. These acts are not dependent
upon the threat of violence or physical force. Frauds are perpetrated by parties and organizations to obtain
money, property, or services; to avoid payment or loss of services; or to secure personal or business
advantage.

20. Governance
The combination of processes and structures implemented by the board to inform, direct, manage, and
monitor the activities of the organization toward the achievement of its objectives.

21. Impairment
Impairment to organizational independence and individual objectivity may include personal conflict of
interest, scope limitations, restrictions on access to records, personnel, and properties, and resource
limitations (funding).

22. Independence
The freedom from conditions that threaten the ability of the internal audit activity to carry out internal audit
responsibilities in an unbiased manner.

23. Information Technology Controls

Controls that support business management and governance as well as provide general and technical
controls over information technology infrastructures such as applications, information, infrastructure, and
people.
Internal Audit Framework 44
24. Information Technology Governance
Consists of the leadership, organizational structures, and processes that ensure that the enterprise’s
information technology supports the organization’s strategies and objectives.

25. Internal Audit Activity

A department, division, team of consultants, or other practitioner(s) that provides independent, objective
assurance and consulting services designed to add value and improve an organization’s operations. The
internal audit activity helps an organization accomplish its objectives by bringing a
systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk
management and control processes.

26. International Professional Practices Framework (IPPF)

The conceptual framework that organizes the authoritative guidance promulgated by The IIA.
Authoritative Guidance is comprised of two categories – (1) mandatory and (2) strongly recommended.

27. Must
The Standards use the word “must” to specify an unconditional requirement.

28. Objectivity
An unbiased mental attitude that allows internal auditors to perform engagements in such a manner that
they believe in their work product and that no quality compromises are made. Objectivity requires that
internal auditors do not subordinate their judgment on audit matters to others.

29. Risk Appetite

The level of risk that an organization is willing to accept.

30. Risk Management

A process to identify, assess, manage, and control potential events or situations to provide reasonable
assurance regarding the achievement of the organization’s objectives.

Internal Audit Framework 45

31. Should
The Standards use the word “should” where conformance is expected unless, when applying professional
judgment, circumstances justify deviation.

32. Significance
The relative importance of a matter within the context in which it is being considered, including
quantitative and qualitative factors, such as magnitude, nature, effect, relevance, and impact. Professional
judgment assists internal auditors when evaluating the significance of matters within the context of the
relevant objectives.

33. Residual Risk

The risk remaining after management takes action to reduce the impact and likelihood of an adverse event,
including control activities in responding to a risk.

34. Risk
The possibility of an event occurring that will have an impact on the achievement of objectives. Risk is
measured in terms of impact and likelihood.

35. Standard
A professional pronouncement promulgated by the Internal Audit Standards Board that delineates the
requirements for performing a broad range of internal audit activities, and for evaluating internal audit
performance.

36. Technology-based Audit Techniques

Any automated audit tool, such as generalized audit software, test data generators, computerized audit
programs, specialized audit utilities, and computer-assisted audit techniques (CAATs).

Internal Audit Framework 46

LIST OF INTERNAL AUDIT
SOFT-WARES
FOR ALL KINDS OF BUSINESSES
# Software name Website
1 TeamMate http://www.teammatesolutions.com

2 Compliance 360 http://www.compliance360.com

3 MetricStream Internal Audit Management Software Solution http://www.metricstream.com

4 Audit Management Software - MKinsight http://www.mkinsight.com

5 Methodware http://www.methodware.com

6 easy2comply Internal Audit Management software http://www.easy2comply.com

7 Barnowl Internal Audit http://www.barnowl.co.za

8 Cura Audit http://www.curasoftware.com

9 Enterprise GRC For Internal Audit http://accelus.thomsonreuters.com

10 RSA Archer Audit Management http://www.emc.com

11 TrackWise audit management software http://www.spartasystems.com

12 Enablon IA - Internal Audit http://enablon.com

Internal Audit Framework 48

 # Software name Website
13 Symbiant Tracker http://www.symbiant.co.uk

14 ACL http://www.cqs.co.za

15 Mega internal audit management solution http://www.mega.com

16 Galileo Audit Management http://www.horwathsoftware.com

17 BPS Resolver’s GRC Suite http://www.bpsresolver.com

18 IBM® OpenPages® Internal Audit Management http://www-142.ibm.com/software

19 http://www.rsmtenon.com/Services/Internal-
RSM TENON
Audit/Internal-Audit-Tools.aspx

20 Intelex's Audits Management Software http://www.intelex.com

21 Rivo's web-based, Audit http://www.rivosoftware.com

22 KMI’s Audit & Inspection module http://www.kminnovations.com

23 Accusystems - Bank Audit Preparation http://www.accusystem.com

24 Aline http://www.align-alytics.com

Internal Audit Framework 49

# Software name Website
25 Infor Approva Continuous Monitoring http://www.infor.com

26 Bulldog Tax Audit - Bulldog Tax Audit http://www.bulldogtaxaudit.com

27 CCH - CCH TeamMate http://www.cchgroup.com

28 CMO Compliane http://www.cmo-compliance.com

29 Complyant http://www.complyant.com

30 ComplianceAnalyzer http://www.complianceease.com

31 Cornerstone OnDemand - Cornerstone Compliance

http://www.cornerstoneondemand.com
Management Software
32 Dakota Software - Dakota Auditor http://www.dakotasoft.com

33 Datawatch - Monarch Professional http://www.datawatch.com

34 Enterprise Auditor http://www.ecora.com/Ecora

35 AuditXL http://www.solutionsforbusinessmanagement.com

36 EZ-R Stats - Audit Commander http://www.ezrstats.com

37 UMT Audit Software http://www.laubrass.com

Internal Audit Framework 50

 ABBREVIATIONS
# Abbreviation Description
1 AGM Annual General Meeting
2 I/A Internal Audit
3 CAE Chief Audit Executive
4 CEO Chief Executive Officer
5 Deptt. Department
6 E/A External Audit
7 EGM Extraordinary General Meeting
8 IIA Institute of Internal Auditors, USA
9 IPPF International Professional Practices Framework
10 International Standards for the Professional
ISPPIA
Practice of Internal Auditing (the standards)
11 PAs Practice Advisories
12 PPs Position Papers
13 PGs Practice Guides

Internal Audit Framework 51

Thank
you!

Internal Audit Framework 52

 ACKNOWLEDGEMENT

THE DEFINITION, THE OFFICIAL TERMINOLOGY AND THE

CODE OF ETHICS USED IN THE PRESENTATION ARE GIVEN BY
THE IIA. WE OWE A DEBT OF GRATITUDE TO THE IIA FOR
USING THEM IN OUR PRESENTATION.

Internal Audit Framework 53

 A presentation by
Ahmad Tariq Bhatti
FCMA, FPA, MA (Economics), BSc
Dubai, United Arab Emirates

Internal Audit Framework 54